The Internet has drastically changed our methods and expectations on how we shop, communicate and socialize. We have seen a huge shift to eCommerce originally in the B2C eCommerce arena but now also in B2B eCommerce. This eCommerce insurgence is having an enormous impact on the shipping industry causing parcel volumes to become a dependable indicator of consumer spending and the overall economic outlook. With a 40 percent increase in annual package volume growth year over year, several key trends have surfaced in 2014.
FedEx and UPS customers struggled with rate increases in 2013 and they will continue to be an issue in 2014. In early May, FedEx announced that as of January 1, 2015, they will apply their dimensional weight pricing construct to all FedEx Ground shipments. In other words, shippers that ship lighter goods in larger boxes will see rate increases at the beginning of next year. Also, as of June 2, 2014, FedEx Freight has increased its fuel surcharge by 3 percent.
With the exit of DHL from the domestic market in 2009, we really only see FedEx and UPS as the big players which leads experts to believe that UPS will follow with similar rate increases. This also leaves rate negotiations dwindling as shippers are finding it more and more difficult to negotiate.
The United States Postal Service (USPS) has made headlines over the past few years with financial problems and a decline in business, but this brings us back to the wonderful Internet and where it has taken us. Yes, the USPS has lost a lot of mail business due to online payments and email, but their parcel business actually has a bright future.
Most B2B eCommerce orders are shipped using FedEx Smart Post or UPS Surepost for either the outbound shipment or the potential return. But, the real winner in this situation is the USPS because they handle part of the delivery for both of these big players. The USPS is also tapping into the growth of online shopping as the exclusive distribution partner for Amazon’s Sunday delivery program. With this grab of a major piece in the market, the USPS will likely increase rates on these services and continue to offer new services and product enhancements.
Regional Carriers: eCommerce Storefront
We know eCommerce is huge, but the age of immediate gratification is causing customers to want their products even quicker. Amazon offers same day delivery and even has a new Amazon Fresh grocery service that also delivers some items from the main storefront the same or next day.
In order to offer this same day delivery, companies like Amazon have opened regionalized distribution facilities throughout the country to decrease shipping times, reduce costs and increase customer service. The regional carriers are the ones who will benefit from this trend.
While the regional carriers only hold three percent of the market, if they keep providing fast, reliable service at a decent rate, they will be able to take full advantage of the high expectations of eCommerce shoppers.
Check out our next blog post, where we’ll look at the next five years in the shipping industry and some advice on how to embrace these trends and prepare for future growth.